PhD Candidate: Nadine Strauss
Scandals in the corporate sector (e.g., Volkswagen manipulation scandal), the announcement of a new product line (e.g., Tesla), or initial public offerings (e.g., Twitter 2012) – the hype of these incidents in the media and strong price fluctuations of these companies therewith has raised the question to what extent news media can influence stock market ratings. With regard to the financial crisis 2007-2009, media have often been blamed to perpetuate panics on the market, reinforcing herd-like and irrational behavior of traders. However, in times of high frequency trading and in synch news provision and analysis, the question reverses: Are stock market prices still influenced by the news media, or do stock market prices rather affect the news media?
Drawing on theories from communication science and behavioral finance, this PhD project aims to disclose the mutual relationship between stock market prices and the news media from various perspectives.
In the first study of this project, articles of Dutch newspapers were automatically analyzed based on a dictionary approach; measuring positive and negative emotions in the news media dealing with 21 listed companies on the Amsterdam Exchange index (AEX) for twelve years (2002-2013). By means of time series analyses, it could be shown that the news media rather reflect movements of the stock market, instead of influencing stock market prices the other day. Another question in this regard is how particular topics with reference to listed companies and their salience in the news affect stock market ratings of these companies. The use of a fully automated topic modeling approach might yield interesting insights into this field.
However, to comply with the characteristics of the fast moving stock market environment and the complexity of information, another study will examine the intraday interrelationships between news media and stock market by investigating a lower time aggregate (5 minute, 1 hour), online news (Twitter) and employing a manual content analysis. Looking at specific dimension of news (e.g., expert opinion, news relevance) opens another intriguing field of research: How does a particular corporate event, e.g., an initial public offering (IPO), and the coverage of this company in the news affect the (initial) stock market price? A manual content analysis of German news articles on IPOs from 2011 until 2015 and a qualitative event analysis on specific corporate events will shed more light on this question.
Trying not only to understand the mutual relationships between media and the stock market from a quantitative perspective, this PhD project also aims to unravel the complex interactions between financial networks as a whole. To do so, a network analysis based on the news flow of corporate events on Twitter will be conducted to get insights in the interactions between the news media, listed corporations, and traders. Furthermore, face-to-face interviews will be conducted with financial journalists, traders, and investor relations (IR) professionals to find out about the triadic relationships between these three actors, their role perceptions, and their everyday working routine in more detail.